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Tuesday, December 9, 2014

Weak ringgit good for some firms

THE weaker ringgit is a boon to the country as it makes Malaysian exports more competitive, says International Trade and Industry Minister Datuk Seri Mustapa Mohamed.

The minister said the government is working on ballpark estimates of the ringgit depreciation and its upside and downside effects on economic activities.

According to analysts, rubber glove makers are the beneficiaries of a weak ringgit while oil and gas players benefit from a stronger US dollar.

The ringgit, which has faced negative pressure recently, weakened to a 15-month low yesterday versus the US dollar as latest payroll numbers out of the United States pointed to chances of an earlier hike in interest rates.

It traded at 3.4955 at 5pm yesterday compared with Friday’s 3.4713.

Last Monday, the ringgit and the local bourse took a beating due to worries over the impact of the soft oil prices as well as Petroliam Nasional Bhd’s (Petronas) decision to cut capital expenditure and its impact on the country’s current account and expenditure.

Mustapa said while Petronas’ capex cut was suitable to address the challenges on the upstream activities in the oil and gas sector, the positive impact would be for the downstream activities, which have bolstered investments in the sector in Johor.

“It’s not just the ringgit that has depreciated but also other regional currencies, due to the strengthening greenback,” said Mustapa at a media briefing yesterday.

AmMarkets described the ringgit as the top loser among the Asian currencies, depreciating 2.12 per cent in just one week.

“It fell to 3.4475 per dollar on Thursday and has surpassed the 3.4500 level at the time of writing.”

Affin Hwang cited rubber glove manufacturers Top Glove and Supermax as the main beneficiaries of a weak ringgit and oil and gas players to benefit from a stronger US dollar.

Investors were concerned the crude oil’s slide will hurt growth in Malaysia, a net exporter and major palm oil producer, the research house added.

On the soft oil price trend, Mustapa commented that lower prices would accelerate global growth, with the boost in economic activities.

Forex analysts have warned that the slump in oil prices and volatility of the currencies of emerging markets will continue until the global crude oil prices stabilise in the first half of next year.